Monetary policy is implemented in line with the decisions of the Monetary Policy Committee. Appropriate policy instruments are used to put the decisions of the MPC regarding interest rates into effect, backed up by effective communication as a means of both ensuring transparency in the policy making process and influencing expectations of future inflation.

Policy instruments

Currently, the Bank's monetary policy stance is signalled through the Bank Rate, which is the rate at which the Bank lends to commercial banks through its discount window. That is, the Bank Rate is the key policy instrument used to signal the direction and magnitude by which the Bank wants market interest rates (deposit and lending rates) to change.

To support this signal, the main policy instrument by the Bank is open market operations (OMOs) which influence the availability of commercial banks' loanable funds, and thereby maintain market rates at a level that is consistent with the monetary policy stance. Other than OMOs, money market operations are supplemented by additional short-term policy instruments, including standby facilities made available in the central bank's capacity as 'lender of last resort' to the commercial banks. Reserve requirements can also play a supporting role.

Alongside these instruments, the Bank reserves the right to use banking regulations and moral suasion to achieve monetary policy objectives.

Monetary policy is implemented within a crawling band exchange rate mechanism which entails periodic adjustments of the nominal exchange rate of the domestic currency in small continuous steps in a forward-looking manner.

Publicity and transparency of monetary policy

The transparency of monetary policy is embraced by most modern central banks for purposes of securing public understanding and credibility for their monetary policy formulation and implementation. Credibility helps to influence public expectations of inflation and determines policy effectiveness. To ensure that its monetary policy is open and transparent, the Bank produces several publications that apprise the public about the monetary policy framework, policy performance and stance, discussions relating to recent monetary policy developments, and macroeconomic data/indicators:

The Monetary Policy Statement (MPS) is published annually to inform stakeholders about the policy framework, performance over the past year and future stance in the context of the inflation outlook. This provides the foundation for the conduct of monetary policy during the year through which the public can expect consistent and predictable policy decisions from the Bank.

The Mid-Term Review of the MPS reviews the implementation and performance of monetary policy over the first 6 months of the year, as well as the inflation outlook.

Press releases communicate policy decisions of the MPC, with each meeting of the Committee followed by an announcement of the decision on the policy rate, as well the reasons underlying the decision.

The Annual Report describes the Bank's operations during the course of the year and includes both a review of recent economic developments and a collection of statistical tables. This helps put monetary policy in the context of broader developments affecting the domestic economy.

The Research Bulletin is the forum through which the Bank publishes a selection of economic research which is judged suitable for wider dissemination, including Research related to monetary policy issues.